Intersuisse Research Report
epitan.com.au
EpiTan 25 January 2005
Clearly moving forward towards the market
Recommendation: Speculative Buy ASX Code: EPT
Last Price $0.87
Market Cap. $112 million
52 Week High $1.13
52 Week Low $0.65
Shares on Issue 128.3 million
Business Description
EpiTan Limited (EPT) is focussed on the prevention of
DNA and skin damage from ultra-violet radiation
exposure. The company's leading drug candidate is
Melanotan, which stimulates the production of melanin
in the skin to prevent skin damage and sunburn injury.
Event
EpiTan is focussed on bringing its drug candidate Melanotan through clinical trials to the market. Melanotan has been shown in Phase II trials to protect the skin against sunburn injury from UV radiation. The company has now made several releases showing strong progress towards its objectives.
* A Phase II trial in Germany was started earlier this month to test Melanotan on Polymorphous Light Eruption ('PMLE') patients.
* Approval has been obtained to start a Phase I/II trial in the UK of a newly developed topical formulation using a patented transdermal delivery technology 'TDS' developed by Florida-based TransDermal Technologies Inc ('TTI'). The trial is expected to start in April after a one-month confirmatory stability trial for the new formulation. We expect the trial will take six months and results should be available some two months later - say December 2005.
Also:
* The Phase I/II dose escalation study on the slow release implant was successfully concluded at Q-Pharm in Brisbane last year. The study was extended as it found that much smaller doses than expected were effective. It has been the basis for the PMLE trial dosage and all further work. A final report is due in March.
* Epitan cash outflows were some $2.5m in each of the last two quarters, 80% of them identified as R&D. Offshore share placements raised $12m in the half-year and EPT had $10.2m cash resources at end December.
* Chairman Wayne Millen relinquishes all executive roles at the end of January and Iain Kirkwood, CFO for almost two years, becomes CEO and MD. Dr Millen, the founder of EPT, remains non-executive chairman and retains 17m shares, escrowed until at least 30 June 2005.
* Mr Kirkwood has effectively had the role of Chief Operating Officer at EPT, so the move should enable a seamless management change. He was previously CFO at FH Faulding for some three years.
* Dr Dennis Wright joins EPT in March as Regulatory Affairs Manager. With 24 years in the industry, some 18 at CSL in Regulatory/Clinical roles followed by four as Regulatory Manager at Mayne, his appointment adds considerably to EPT's experienced team. Interfacing with the TGA, FDA and UK/European regulatory agencies will be a key part of driving Melanotan to market.
* Dr Wright will also be responsible for regulatory management of the portfolio of prescription dermatology products being built up for marketing, with Melanotan, in Australia and New Zealand. Three such products were in-licensed in 2004 and rights to other products are being finalised with announcements over the next few months.
Impact
The Topical 'Spray-on' Formulation
In Morning Notes on 4 October 2004 at 85¢ we reported that at the AGM Wayne Millen said that given very positive preclinical studies, a human clinical trial using a topical formulation of EPT's prospective sunburn injury drug Melanotan was planned to begin by the end of the year. Our August 2004 Report shows the substantial prospects for this user-friendly form of delivery. The news above now confirms this first human trial for a topical formulation of Melanotan.
This is a very important development for EpiTan, expected to have far reaching commercial implications. The Medicines and Healthcare products Regulatory Agency (MHRA) in the UK is the equivalent of the TGA in Australia and FDA in the US. Approval for the trial at the William Harvey Research Institute at St Bartholemew's Hospital and the Royal London School of Medicine and Dentistry on 30 healthy volunteers is a significant step for EPT.
It also shows the speed of development of the topical TDS formulation achieved with TTI. Tests in Adelaide on EPT's animal model proved highly encouraging. In the London trial, a 1ml solution of Melanotan will be sprayed onto the arm daily for ten days. The TDS system, for which EPT filed a provisional US patent last October, is expected to enable the drug to be equally distributed throughout the body systemically. If the trial is successful it will confirm EPT's 'second generation' prospects for Melanotan across much wider markets.
EPT is also working with pSivida on a porous silicon slow release injectible. This would use a small needle and if successful could replace the current implant system. While regulators might favour delivery by injection to build up usage data under physician control, they might also be attracted to the non-invasive TDS spray system- which would certainly appeal to most of the public. EPT thus could have the luxury of a choice of delivery systems.
The PMLE Potential
Confirmation that the PMLE trial began on time is also important. PMLE is known as "sun poisoning" or "sun allergy" and prevalent in northern latitudes with some 100 million reported sufferers worldwide. As the symptoms of PMLE often tend to lessen as the summer progresses it is hoped that Melanotan may act as a preventative and thus the trial might show that Melanotan can help those affected by PMLE. The trial should end in April, with results two months later. A positive result could accelerate Phase III clinical trials- it would have a better defined clinical end-point and quicker regulatory acceptance because the drug could be seen to
address a significant unmet medical need.
EPT is confident that it can move to Phase III trials on the basis that Melanotan can give protection against sunburn injury.
Preparations towards such trials continue. It is however simpler and quicker to prove a case for use in preventing an existing medical condition, so success with the PMLE trial in the current half-year could be a major plus for EPT.
The Way to Commercialisation
EPT began discussions to secure alliances for Phase III trials and commercialisation in February 2004. There is no news yet on progress, and such discussions typically take 12-24 months. We assume that discussions continue with several companies with a view to negotiate deals in time to support Phase III trials and worldwide marketing. EPT has $10m cash to support this schedule and some key trials underway or planned.
EPT is now very well placed to proceed to Phase III trials within the next year or so if current trials result as expected. The trials should give EPT, the regulators and potential users the choice of delivery by spray or injection and two possible indications for approval.
This choice is not normally available for a drug and should speed the time to market while enhancing prospects for penetration of several different markets and collection of pre- and post-market clinical use data. We maintain our Speculative Buy. |
